Canada: Ontario’s 2015 Budget: Pension Reforms Of The Past, Present And Future

On April 23, 2015, Minister of Finance Charles Sousa tabled Ontario's 2015 Budget: Building Ontario Up (the Budget). Among other things, the Budget made a number of significant announcements regarding pension reform, including unveiling further details on the proposed "Ontario Retirement Pension Plan" (ORPP), the made-in-Ontario supplement to the Canada Pension Plan. The Budget also dealt with private pension plans, mostly by way of updates to previously announced measures, although it included some new proposals as well. In particular, the Budget included updates on Ontario pooled registered pension plans (PRPPs); the government's review of target benefit plans (TBPs); current and future amendments to the Pension Benefits Act (PBA) to deal with various private and public sector issues; and proposals for asset pooling of plans in the broader public sector.


As expected, the Budget provided some further details on the proposed design and governance of the ORPP. The Budget re-confirmed that the ORPP would become operational by January 1, 2017. This deadline would also be imposed on the government by Bill 56, the Ontario Retirement Pension Plan Act, 2015, if passed in its current form. Bill 56 was ordered for Third Reading on April 14, 2015.

Highlights of the Budget's new ORPP announcements are as follows:

  • Draft legislation will be introduced to create the Ontario Retirement Pension Plan Administration Corporation (ORPP AC), which will be responsible for administering the ORPP. Among other things, the ORPP AC will be:
    • Responsible for operationalizing the ORPP, administering the plan on a day-to-day basis and investing contributions;
    • Independent, with a professional board of directors of between nine and 15 members appointed by the Lieutenant Governor in Council and with a board nomination process that has as its goal securing highly qualified, expert board members (to this end, there would also be an independent nominating committee composed of three members: the Chair of the Board's Governance Committee and two non-board members appointed by the Lieutenant Governor in Council); and
    • Subject to a transparency and accountability framework that is based on best practices in pension governance, including annual reporting, annual meetings and strong financial controls.
  • A commitment to consider stakeholder feedback to date on the following, as yet unresolved questions:

    • The scope of the ORPP and, in particular, whether to exclude current members of defined benefit (DB) pension plans, TBPs (including multi-employer pension plans (MEPPs)) and "capital accumulation plans" (including defined contribution (DC) plans, PRPPs (once available), group registered retirement savings plans and deferred profit sharing plans).
    • The minimum earnings threshold under which no contributions would be remitted and, in particular, whether to mirror the Canada Pension Plan's minimum earnings threshold of $3,500.
    • How to support the self-employed given provisions in the Income Tax Act (Canada) (ITA) that limit participation in a "registered pension plan" to "employees".

Next Steps for Employers in Ontario

While the Budget revealed some further nuances of the ORPP and its governance structure, it leaves many employers—including those who currently contribute to DB plans or TBPs—with key unanswered questions. Employers will need to stay tuned to the ORPP debate and future announcements, which can be expected to continue over the coming months as the 2017 go-live date nears. In particular, employers entering collective bargaining prior to 2017 may need to consider the effect of the potential mandatory employer contribution to the ORPP when negotiating the overall compensation package.

For further background on the ORPP, please refer to our earlier e-alerts of February 6, 2015 and May 1, 2014.

Other Announcements Relating to Pension Plans


The Budget contained little additional information about PRPPs, other than to confirm that, as promised in the 2014 Budget, the government introduced in December of last year Bill 57, currently titled the Pooled Registered Pension Plans Act, 2015. The Legislature referred Bill 57 to the Standing Committee on Social Policy on April 21, 2015. This legislation is largely a mirror of the federal analogue.


The government committed to release "soon" a consultation paper on a proposed regulatory framework for target benefit MEPPs. The final regulatory framework would replace the time-limited solvency funding concessions available to "specified Ontario multi-employer pension plans" (SOMEPPs). MEPPs must meet certain enumerated criteria to qualify as SOMEPPs (including that contributions are governed by one or more collective agreements, and all or substantially all participating employers are not tax exempt under the ITA). It is possible that administrators of MEPPs that do not qualify as SOMEPPs will have an opportunity to make submissions that these criteria be relaxed or eliminated.

The government indicated that feedback from the initial consultation would inform the subsequent development of a framework for single-employer TBPs, although it committed to no time horizon.

Measures Affecting Existing Plans in Ontario

As promised in the 2014 Budget, measures to deal with contribution holidays and benefit improvements in respect of Ontario pension plans have recently been released for consultation with comments due no later than June 12, 2015. In essence, the proposals would allow contribution holidays only if, after taking the holiday, the plan had a transfer ratio (stated in a simplified fashion, the ratio of plan assets to plan liabilities, both determined on a solvency basis) of at least 105%. On the flip side, benefit improvements could be made only if certain minimum funding standards would be met immediately after the amendments are adopted and the costs of the amendment are amortized over a maximum period.

Finally, the Budget re-affirmed the government's intention to introduce an exception to the so-called 30% Rule in respect of pension investments in Ontario infrastructure. It promised that draft legislation, taking into account comments received earlier in 2015, will be released for further comment in the coming months.

Other proposed measures include:

  • Regulatory amendments to permit the payment of variable (RRIF-like) benefits directly from DC pension plans. Amendments to the PBA remain unproclaimed in force pending development of supporting regulations.
  • New reporting requirements to reflect changes to professional accounting standards, which the Budget indicated may include increasing the threshold at which an auditor's report must be filed respecting a plan's financial statements from $3 million to $10 million; introducing an alternative to the requirement to file audited financial statements; and requiring Investment Information Statements for DC plans.
  • New regulations to facilitate the creation of pension advisory committees (PACs). The PBA already permits PACs, but in practice very few exist.
  • New regulations to support new powers of the Superintendent of Financial Services, which were passed in 2010 but have not yet been proclaimed in force.

Broader Public Sector

The Budget highlighted that measures in connection with combining and converting eligible broader public sector pension plans into so-called JSPPs (jointly sponsored pension plans) have been introduced legislatively and proposals for the criteria to exempt such plans from solvency funding requirements have been introduced for comment.

Additionally, as previously announced, the government reaffirmed its support for a framework to allow broader public sector pension plans to pool their assets with those of endowment and other public funds for investment purposes. The Budget provided an update on this project by noting that a report from a technical committee considering this initiative had recently been received and reviewed and that the government will use the report to develop legislation to establish a new arm's length asset pooling entity. The government provided no specifics as to the timing of this legislation.

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